News Article

Business Recovery & Insolvency

2011 saw business insolvencies in the UK increase by a small margin

By CreditMan Wednesday, January 25, 2012

The Insolvency Index from Experian®, the global information services company, today revealed that the insolvency rate[1] for 2011 rose only slightly compared to 2010.

21,070 UK businesses, 1.1 per cent of the total business population, failed in 2011. This represented a marginal increase on the 1.03 per cent (19,818 failures) recorded in 2010. In 2008 and 2009, the insolvency rates were considerably higher, reaching 1.16 per cent and 1.25 per cent respectively.

Experian’s analysis also shows that during the second half of 2011 the insolvency rate neither rose nor fell significantly - from a rate of 0.53 per cent (H1) to 0.56 per cent (H2).

Max Firth, UK Managing Director for Experian’s Business Information Services division, said: “Given the challenging economic climate in 2011, businesses in the UK were pretty resilient and this was reflected by the stable insolvency rate during the year.

“For businesses to improve their financial health and avoid insolvency, it is vital that they understand the risks they are exposed to and have strategies in place to protect themselves. By monitoring the performance of all current and potential clients, they can fully understand and prepare for the impact they could have on them if they failed.”

Yorkshire sees insolvency rate fall
Yorkshire was the only region to see an improvement from 1.46 per cent (1,724 companies) in 2010 to 1.39 per cent (1,653) in 2011. This is the second successive year the region has seen the insolvency rate fall.

Wales witnessed the biggest increase in its insolvency rate, jumping from 1.01 per cent (569 companies) in 2010 to 1.18 per cent (654) in 2011. Scotland, which has experienced significantly lower levels of insolvencies compared to other regions since 2005, came more into line with the rest of the UK with an insolvency rate of 0.93 per cent.

The UK’s biggest sectors
Of the UK’s biggest sectors - business services, building/construction, property, IT and leisure/hotels – the property sector saw the largest increase in its insolvency rate, from 0.72 per cent in 2010 to 0.91 per cent in 2011. 1,149 property companies failed in 2010, compared to 1,345 in 2011.

Firms with one or two employees saw the biggest increase in the insolvency rate during 2011 – from 0.63 per cent in 2010 to 0.71 per cent. Despite this increase, they still managed to maintain the lowest rate of insolvencies compared to their larger counterparts.

[1] The insolvency rate is calculated by comparing the number of businesses that failed with the total business population in Great Britain.